by Calculated Risk on 7/04/2009 01:39:00 PM

Here are some green shoots ... property tax appeals are growing like weeds!

From Jack Healy at the NY Times: Tax Bill Appeals Take Rising Toll on Governments

Homeowners across the country are challenging their property tax bills in droves as the value of their homes drop, threatening local governments with another big drain on their budgets.

The requests are coming in record numbers, from owners of $10 million estates and one-bedroom bungalows, from residents of the high-tax enclaves surrounding New York City, and from taxpayers in the Rust Belt and states like Arizona, Florida and California, where whole towns have been devastated by the housing bust.

“It’s worthy of a Dickens story,” said Gus Kramer, the assessor in Contra Costa County, Calif., outside San Francisco.

And a few quotes ...

“We’ve been absolutely getting killed,” said Robert W. Singer, the mayor of Lakewood Township, N.J. ...

“We’re hearing from people like this every day,” [Jeff Furst, the appraiser in St. Lucie County, Fla] said. In St. Lucie ... property tax revenue is expected to fall 20 percent, and tax appeals are 10 times as high as they are normally. “Most people are going to see a significant decline in their tax bill.”

Mr. Kramer, the assessor in Contra Costa County, said homeowners started swamping his office with requests for new assessments in December. As many as 500 people would call in one day. His voice mail message now begins: “If you’re calling to request an informal review of your property value due to the declining real estate market.”

The article has several stories from around the country.

New Jersey has really high property taxes - the article provides an example of a house assessed at $1.8 million with a $53,000 per year property tax bill (almost 3 times higher than a house with a similar appraised value in California). When that house in New Jersey sells (currently listed at $1.3 million) or is reappraised, the local tax revenues will take a hit. And that same story is being repeated over and over ...

by Calculated Risk on 7/04/2009 09:08:00 AM

From Don Lee at the LA Times: Another wave of foreclosures is poised to strike

Just as the nation's housing market has begun showing signs of stabilizing, another wave of foreclosures is poised to strike, possibly as early as this summer, inflicting new punishment on families, communities and the still-troubled national economy.
...
Just how big the foreclosure wave will be is unclear. But loan defaults are up sharply. ... rising foreclosures will depress home values, pushing more homeowners underwater. Mark Zandi of Moody's Economy.com estimates that 15.4 million homeowners -- or about 1 in 5 of those with first mortgages -- owe more on their homes than they are worth.
...
"Absolutely," Chase Bank spokesman Tom Kelly said when asked about an impending surge in foreclosures. ... Bank of America spokesman Dan Frahm said the company was projecting a "slow increase" in the number of monthly foreclosures, potentially reaching 30% above previous normal levels.
...
But anecdotal reports indicate that foreclosure sales have started to climb again in the second quarter. And the pipeline is clearly getting fuller.

... just recently, said [Jerry Abbott, a broker and co-owner of Grupe Real Estate in Stockton], there's been a surge of requests for so-called broker price opinions, or appraisals that lenders often ask brokers to provide just before they put a foreclosed property on the market.

"I think it's going to be a very big wave," he said. "Just like what we saw through 2008."

Hoocoodanode? And just wait for the Option ARM recast wave ...

by Calculated Risk on 7/04/2009 01:02:00 AM

This article provides a history of brokered deposits, and discusses the potential dangers, and the inability of regulators to limit the practice.

From Eric Lipton and Andrew Martin at the NY Times: For Banks, Wads of Cash and Loads of Trouble

[B]rokered deposits ... is one of the primary factors in the accelerating wave of failures among small and regional banks nationwide. The estimated cost to the Federal Deposit Insurance Corporation over the last 18 months is $7.7 billion, and growing.
...
The 79 banks that have failed in the United States over the last two years had an average load of brokered deposits four times the national norm ... And a third of the failed banks, the analysis shows, had both an unusually high level of brokered deposits and an extremely high growth rate — often a disastrous recipe for banks.
...
The 371 still-operating banks on Foresight’s “watch list” as of March held brokered deposits that, on average, were twice the norm.

Regulators have tried to limit brokered accounts. Recently the FDIC suggested higher insurance premiums for fast growing banks that depend on brokered deposits. However, just as the FDIC tightened the rules slightly, the banks are finding new ways to attract hot money:

[B]anks — even those considered unsound — [are turning] to a “listing service,” a source of hot money by another name. Instead of paying a broker, banks pay to subscribe to an electronic bulletin board of credit unions with money to park.

One listing service, QwickRate, based in Marietta, Ga., has just 18 employees crammed into a tiny second-floor office. But it delivered $1.6 billion in hot money to banks in May, up from $450 million last May. The growth is coming partly because banks on the edge of failure are coming to the service for a lifeline.
emphasis added

This is a well known problem - George Hanc at the FDIC wrote in 1999: Deposit Insurance Reform: State of the Debate.

Owners of insolvent or barely solvent banks have strong incentives to favor risky behavior because losses are passed on to the insurer, whereas profits accrue to the owners.

by Calculated Risk on 7/03/2009 09:00:00 PM

Loudon Wainwright III performs at Madison Square Park in NYC (June 17, 2009)

"Fear Itself"

Repeat: "The Krugman Blues"



*No, I don't think the economy is in a depression ...

by Calculated Risk on 7/03/2009 05:13:00 PM

Click on graph for larger image in new window.

These are spot prices for Cushing WTI from the EIA (source).

It is fun to look back ... I started speculating in March '08 about a sharp decline in oil prices in the 2nd half of 2008.

And I posted many times in the late spring about demand destruction (like fewer U.S miles driven), Asian countries reducing gasoline subsidies, China stock piling oil for the Olympics, etc.

But this story was probably the key clue that oil prices were peaking (from June 28, 2008). From the NY Times: Cruise Night, Without the Car

For car-loving American teenagers, this is turning out to be the summer the cruising died.
...
From coast to coast, American teenagers appear to be driving less this summer. Police officers who keep watch on weekend cruising zones say fewer youths are spending their time driving around in circles...

We knew it was almost over when teenagers stopped cruising!